(Bloomberg) — Connecticut Governor Ned Lamont proposed $336 million in tax cuts, becoming the latest governor to do so as state coffers bulge with better-than-expected revenue and billions of dollars in federal pandemic aid.
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Lamont, a Democrat running for re-election, floated a package mainly targeted to middle and lower-income residents that would:
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Increase a property tax credit to $300 from $200 and expand eligibility
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Reduce property taxes on 1.7 million motor vehicles
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Accelerate the planned phase-in of the pensions and annuities exemption from income taxes
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Expand a student loan tax credit
Connecticut’s current property tax credit is limited to single filers earning as much as $109,500 and joint filers making $130,500 and to those over the age of 65 or with dependents. Lamont would expand the credit to all adults within those income limits, an estimated 500,000 people.
The governor also proposed reducing the mill rate cap on motor vehicle property taxes to 29 mills from 45 mills and reimburse local governments for the revenue loss. A 29-mill cap on all motor vehicles will provide property tax relief for over 1.7 million vehicles in 103 towns and cities, including 20 of the 25 distressed municipalities, the governor said.
A mill rate of one mill means that owners of real, personal and motor vehicle property are taxed at a rate of $1 on every $1,000 of assessed taxable property.
“Next Phase”
“Connecticut’s fiscal health is stronger than it’s been in decades, and now we can move toward the next phase of the Connecticut comeback — cutting taxes for the people who live here,” Lamont said in a news release.
Extraordinary federal stimulus and a rebounding economy has prompted governors in more than a dozen states, including Illinois, New York, Massachusetts, Georgia and South Carolina to propose tax cuts. Personal income tax revenue rose 22% in the fourth quarter, compared with the same period last year, the U.S. Bureau of Economic Analysis reported Jan. 27. Sales tax revenue grew 13% and property tax revenue increased about 5%.
Related: Illinois Governor Proposes Tax Cuts in Election-Year Budget
Connecticut, home to the hedge fund industry and investment bankers and traders, is also benefiting from a banner year on Wall Street.
The state is projecting a $1.5 billion budget surplus for the fiscal year ending June 30, almost $600 million more than last month’s estimate. Connecticut’s rainy-day fund is projected to grow to more than $5.5 billion, enough to cover a quarter of general-fund spending, and the state received $2.8 billion under the American Rescue Plan.
Growing reserves will help ease the fiscal stress caused by Connecticut’s high debt load and retirement costs. In 2017, lawmakers passed a bill requiring the state to stock its rainy-day fund with any capital-gains and bonus taxes that exceed a certain threshold.
Connecticut has transferred almost $1.7 billion in surplus cash into its underfunded state employee and teachers’ pension funds in the last two years and it may plow an extra $6.3 billion into the retirement system over the next five years, according to bond offering documents.
(Updates with mill rate definition in fifth paragraph)
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